U.S. govt threatens to seize RI assets over OPIC dispute

U.S. govt threatens to seize RI assets over OPIC dispute

JAKARTA (JP): The United States might seize Indonesian assets
if it fails to settle the US$290 million claim made by the U.S
government's Overseas Private Investment Corp. (OPIC), U.S.
Ambassador Robert Gelbard said here on Tuesday.

Ambassador Gelbard said his government was beginning to lose
patience with the Indonesian government's reluctance to pay the
OPIC claim.

"There is always the possibility of declaring expropriation,"
Gelbard told reporters about the possible impounding of
Indonesian state assets.

"If we were to do this (expropriation), it would result in a
dramatic deterioration of the rupiah and would hurt Indonesia
very much," he added.

OPIC made its claim after state electricity company PT
Perusahaan Listrik Negara (PLN) failed to pay independent power
producer MidAmerican Energy Holding, formerly known as Calenergy,
a sum of $572 million as ordered by an independent arbitration
panel.

MidAmerican filed arbitration proceedings against PLN in
September 1998 after the state company refused to pay for
electricity from MidAmerican's geothermal power plant in Dieng,
Central Java and after the government suspended its other plant
in Patuha, West Java.

PLN lost the arbitration proceedings last year and was ordered
to pay MidAmerican $572 million. Struck by financial
difficulties, PLN refused to pay the claim, forcing MidAmerican
to call in its OPIC insurance. OPIC paid $290 million of the
claim.

"The result unfortunately was that OPIC - an agency of the
U.S. government - had to pay out the largest claim in its history
to this company (MidAmerican)," Gelbard explained.

He said his government had shown patience during negotiations
despite reluctance from the Indonesian side to negotiate a
serious settlement.

Gelbard criticized Indonesia for delaying the negotiation
process, and regretted negative statements such as those made by
Finance Minister Bambang Sudibyo.

He was referring to Bambang's statement in March saying that
Indonesia would not pay OPIC the claim because it had no money.

Bambang has said that the contract with MidAmerican,
negotiated under former President Soeharto's regime, was tainted
with corruption, collusion and nepotism.

The power purchase contracts were signed with MidAmerican's
subsidiaries Himpurna California Energy Ltd (HCE) and Patuha
Power Ltd (PPL).

HCE is a joint venture between MidAmerican and PT Himpurna
Enersindo Abadi, a company formed by Indonesian military
veterans. PPL is a joint venture between MidAmerican and local
company Mahaka Energy.

The finance minister further denied the claims of Indonesian
responsibility, as it was a deal based on OPIC's unilateral
decision.

"But we insist that the Indonesian government must honor its
obligation," Gelbard said.

The ambassador said he was looking forward to a settlement
very soon, as the U.S. government's patience was nearing its end.

"Many members in our Congress have lost patience and are
urging us," he said referring to the possibility of declaring
expropriation.

Gelbard said that the OPIC dispute was already hurting
Indonesia's credit rating and the country's investment climate,
and was discouraging investors from entering Indonesia.

State Minister of Investment and State Enterprises Development
Rozy Munir said he had not been informed yet on the latest
development in the OPIC negotiations.

Rozy, who is a member of PLN's restructuring team, said he
regretted that negotiations with OPIC apparently failed to reach
a settlement.

"It's a pity that we cant' reach a win-win solution, because
there had been some positive signals in the beginning," he said
without elaborating on what the signals were. (bkm)